ZixCorp Reports Strong Second Quarter 2016 Financial Results
Highest quarterly revenue in company history highlighted by record quarterly New First Year Orders
Zix Corporation (NASDAQ: ZIXI), a leader in email data protection, today announced financial results for the
second quarter ended June 30, 2016.
Second Quarter 2016 Financial Highlights & Year-Over-Year Comparisons
- Revenue increased 12% to a record $14.9 million
- New first year orders (NFYO) increased 20% to a record $3.0 million
- Total quarterly orders increased 18% to a record $20.4 million
- Ending backlog increased 9% to a record $80.9 million
- Annual contract value increased 9% to a record $59.5 million
- Cash flow generated from operations increased by $0.5 million to $3.5 million
“The team is pleased with the record financial performance in the second quarter as it represents early validation of the work
we are doing to execute on our growth strategy,” said David Wagner, ZixCorp’s Chief Executive Officer. “The increasing adoption of Zix’s solutions by enterprise
accounts demonstrates the importance of best of breed email encryption to address today’s increasing information security
threats.”
Record quarterly revenue was driven by the addition of recurring revenue from new customer contracts, strong revenue retention,
and a non-recurring revenue catch-up payment from an OEM partner. GAAP fully diluted earnings per share decreased 46% to $0.01.
Non-GAAP fully diluted earnings per share increased 63% to $0.06. Cash and cash equivalents at quarter-end totaled $20.7 million
compared to $27.1 million at the end of the prior quarter. The decrease in cash and cash equivalents was primarily due to $8.8
million used to repurchase the company’s common shares during the quarter under our previously announced repurchase program.
Second Quarter 2016 Operational Highlights
- Strengthened executive team with the appointment of industry veterans David Rockvam as CFO and Kelly
Haggerty as VP of product management & strategy
- Achieved record NFYO from the enterprise direct sales team which supports customers with 1,000
employees or more
- Won a three-year contract with a top 20 financial institution through an OEM partner
Management Commentary
“In joining Zix, I have a tremendous opportunity to apply my deep industry experience in SaaS-focused, data security businesses.
In particular, I can help the company further embrace the SaaS model and build on its strong position as the leader in email
encryption,” said David Rockvam, ZixCorp’s Chief Financial Officer. “I’m excited to start my role with such a record-breaking
quarterly performance and feel strongly that we can execute on our long-term strategy.”
Second Quarter 2016 Corporate Financial Summary and Other Operational Metrics
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| $ in Millions, except per share data |
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Q2 2016 |
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Q2 2015 |
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Change (1) |
| Revenue |
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$14.9 |
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|
$13.3 |
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12% |
| GAAP Gross Profit |
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$12.3 |
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|
$10.9 |
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13% |
| GAAP Net Income |
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$0.6 |
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|
$1.1 |
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- 50% |
| GAAP Net Income Per Share – Diluted |
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$0.01 |
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$0.02 |
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- 46% |
| EBITDA (2) |
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$1.6 |
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$2.3 |
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- 32% |
| EBITDA Margin |
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10.4% |
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17.4% |
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- 40% |
| Non-GAAP Adjusted Gross Profit (3) |
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$12.4 |
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$10.9 |
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13% |
| Non-GAAP Adjusted Net Income (3) |
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$3.3 |
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$2.2 |
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51% |
| Non-GAAP Adjusted Net Income Per Share – Diluted (3) |
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$0.06 |
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$0.04 |
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63% |
| Adjusted EBITDA (3) |
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$3.9 |
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$2.8 |
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39% |
| Adjusted EBITDA Margin |
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26.3% |
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21.3% |
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24% |
| New First Year Orders |
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$3.0 |
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$2.5 |
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20% |
| Total Orders |
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$20.4 |
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$17.4 |
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18% |
| Backlog (4) |
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$80.9 |
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$73.9 |
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9% |
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(1)
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Changes are based on actuals versus numbers shown in the columns, which may reflect rounding
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(2)
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Adjusted earnings before interest, taxes, depreciation and amortization |
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(3)
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A reconciliation of GAAP to non-GAAP adjusted results is included in this press release and
available on our investor relations Web page at http://investor.zixcorp.com
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(4)
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Service contract commitments that represent future revenue to be recognized as the
services are provided |
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Financial Outlook
For the third quarter 2016, the company forecasts revenue to range between $15.0 million and $15.1 million, representing an
increase of 7% to 8% year-over-year. The company forecasts fully diluted GAAP earnings per share to be in a range of $0.01 and
$0.02 and fully diluted adjusted earnings per share to be $0.06 for the third quarter 2016.
For fiscal 2016, the company anticipates revenue to range between $59.6 million and $60.2 million, representing an increase of
9% and 10% compared to fiscal 2015. The company forecasts fully diluted GAAP earnings per share to be between $0.06 and $0.08 and
continues to forecast fully diluted adjusted earnings per share of $0.24 for fiscal 2016.
Conference Call Information
Management will discuss these financial results and outlook on a conference call on Tuesday, July 26, 2016, at 5 p.m. ET (2 p.m.
PT).
A live webcast of the conference call will be available in the investor section of ZixCorp’s website here. Alternatively, participants can access the conference call by dialing 1-855-853-6940 (U.S. toll-free) or
1-720-634-2906 (international) at least 15 minutes before the call and entering access code 37240909. If you have any difficulty
connecting with the conference call, please contact Liolios Group at 1-949-574-3860.
An audio replay of the conference will be available for seven days, by dialing 1-855-859-2056 (U.S. toll-free) or 1-404-537-3406
(international) and entering the access code 37240909. An archive of the webcast will also be available in the investor section of
the company’s website here.
About ZixCorp
ZixCorp is a trusted leader in email data protection. ZixCorp offers industry-leading email encryption, a unique email data loss
prevention (DLP) solution, and an innovative bring your own device (BYOD) email solution to meet your company’s data protection and
compliance needs. ZixCorp is trusted by the nation’s most influential institutions in healthcare, finance and government for
easy-to-use secure email solutions. ZixCorp is publicly traded on the Nasdaq Global Market under the symbol ZIXI, and its
headquarters are in Dallas, Texas. For more information, visit www.zixcorp.com.
Statements in this release that are not purely historical facts or that necessarily depend upon future events, including
statements about forecasts of sales, revenue or earnings, potential benefits of the Cisco or other strategic relationship, or other
statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place
undue reliance on forward-looking statements. All forward-looking statements are based upon information available to ZixCorp on the
date this release was issued. ZixCorp undertakes no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that
could cause actual events or results to differ materially from the events or results described in the forward-looking statements,
including risks or uncertainties related to market acceptance of new ZixCorp solutions and how privacy and data security laws may
affect demand for ZixCorp email data protection solutions. ZixCorp may not succeed in addressing these and other risks. Further
information regarding factors that could affect ZixCorp financial and other results can be found in the risk factors section of
ZixCorp’s most recent filing on Form 10-K with the Securities and Exchange Commission.
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| ZIX CORPORATION |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
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June 30, |
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2016 |
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December 31, |
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(unaudited) |
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2015 |
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
|
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$ |
20,728,000 |
|
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$ |
28,664,000 |
| Receivables, net |
|
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|
785,000 |
|
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|
498,000 |
| Prepaid and other current assets |
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|
2,875,000 |
|
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|
2,908,000 |
| Total current assets |
|
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|
24,388,000 |
|
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|
32,070,000 |
| Property and equipment, net |
|
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|
4,279,000 |
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|
4,143,000 |
| Goodwill |
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|
2,161,000 |
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|
2,161,000 |
| Deferred tax assets |
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|
47,767,000 |
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|
48,912,000 |
| Total assets |
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$ |
78,595,000 |
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$ |
87,286,000 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable and accrued expenses |
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$ |
5,372,000 |
|
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$ |
5,067,000 |
| Deferred revenue |
|
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|
24,617,000 |
|
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|
23,182,000 |
| Total current liabilities |
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|
29,989,000 |
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|
28,249,000 |
| Long-term liabilities: |
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| Deferred revenue |
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|
1,435,000 |
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|
839,000 |
| Deferred rent |
|
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|
1,427,000 |
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|
1,426,000 |
| Total long-term liabilities |
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|
2,862,000 |
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|
2,265,000 |
| Total liabilities |
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|
32,851,000 |
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|
30,514,000 |
| Total stockholders’ equity |
|
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|
45,744,000 |
|
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|
56,772,000 |
| Total liabilities and stockholders’ equity |
|
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|
$ |
78,595,000 |
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$ |
87,286,000 |
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| ZIX CORPORATION |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
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Three Months Ended June 30,
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Six Months Ended June 30, |
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2016 |
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2015 |
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2016 |
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2015 |
| Revenue |
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|
$ |
14,930,000 |
|
|
|
$ |
13,302,000 |
|
|
|
|
$ |
29,258,000 |
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|
|
$ |
26,375,000 |
|
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|
|
|
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|
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|
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|
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|
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| Cost of revenue |
|
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|
|
2,635,000 |
|
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|
|
2,429,000 |
|
|
|
|
|
5,172,000 |
|
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|
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4,642,000 |
|
| Gross profit |
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|
|
|
12,295,000 |
|
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|
|
10,873,000 |
|
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|
24,086,000 |
|
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21,733,000 |
|
| Operating expenses: |
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| Research and development |
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2,321,000 |
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2,094,000 |
|
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4,500,000 |
|
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|
4,199,000 |
|
| Selling, general and administrative |
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|
9,028,000 |
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|
7,046,000 |
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|
16,172,000 |
|
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|
|
13,961,000 |
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| Total operating expenses |
|
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|
11,349,000 |
|
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|
|
9,140,000 |
|
|
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|
|
20,672,000 |
|
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|
18,160,000 |
|
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| Operating income |
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|
|
946,000 |
|
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|
1,733,000 |
|
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|
3,414,000 |
|
|
|
|
3,573,000 |
|
| Operating margin |
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|
6 |
% |
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|
13 |
% |
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|
12 |
% |
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|
14 |
% |
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| Other income, net |
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|
50,000 |
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29,000 |
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|
109,000 |
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|
52,000 |
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| Income before income taxes |
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|
996,000 |
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|
1,762,000 |
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|
3,523,000 |
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|
3,625,000 |
|
| Income tax expense |
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|
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|
(437,000 |
) |
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|
(647,000 |
) |
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|
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|
(1,394,000 |
) |
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|
(1,334,000 |
) |
| Net income |
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|
$ |
559,000 |
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$ |
1,115,000 |
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$ |
2,129,000 |
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$ |
2,291,000 |
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| Basic income per common share: |
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$ |
0.01 |
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$ |
0.02 |
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$ |
0.04 |
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$ |
0.04 |
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| Diluted income per common share: |
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$ |
0.01 |
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$ |
0.02 |
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$ |
0.04 |
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$ |
0.04 |
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| Shares used in per share calculation - basic |
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|
53,766,979 |
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|
57,146,014 |
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|
54,884,713 |
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|
56,822,953 |
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| Shares used in per share calculation - diluted |
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54,270,000 |
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|
58,373,407 |
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55,425,683 |
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|
57,886,307 |
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| ZIX CORPORATION |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
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Six Months Ended June 30,
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2016 |
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2015 |
| Operating activities: |
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| Net income |
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$ |
2,129,000 |
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$ |
2,291,000 |
|
| Non-cash items in net income |
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|
3,326,000 |
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|
|
|
2,937,000 |
|
| Changes in operating assets and liabilities |
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|
2,087,000 |
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|
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|
337,000 |
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| Net cash provided by operating activities |
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|
7,542,000 |
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|
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|
5,565,000 |
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| Investing activities: |
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| Purchases of property and equipment |
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|
|
(1,238,000 |
) |
|
|
|
(1,400,000 |
) |
| Net cash used in investing activities |
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|
|
(1,238,000 |
) |
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|
|
(1,400,000 |
) |
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| Financing activities: |
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| Proceeds from exercise of stock options |
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|
50,000 |
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|
3,642,000 |
|
| Purchase of Treasury Stock |
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|
(14,290,000 |
) |
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|
(1,518,000 |
) |
| Net cash used in financing activities |
|
|
|
|
(14,240,000 |
) |
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|
2,124,000 |
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|
|
|
|
|
|
| Increase (Decrease) in cash and cash equivalents |
|
|
|
|
(7,936,000 |
) |
|
|
|
6,289,000 |
|
| Cash and cash equivalents, beginning of period |
|
|
|
|
28,664,000 |
|
|
|
|
21,685,000 |
|
| Cash and cash equivalents, end of period |
|
|
|
$ |
20,728,000 |
|
|
|
$ |
27,974,000 |
|
|
|
|
|
|
|
|
|
|
|
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| |
| ZIX CORPORATION |
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
| (Unaudited) |
|
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|
|
|
|
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|
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|
|
|
|
|
|
|
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|
Three Months Ended
|
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Six Months Ended
|
|
|
|
|
|
|
June 30,
|
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|
|
June 30,
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP revenue |
|
|
|
|
|
$ |
14,930,000 |
|
|
|
$ |
13,302,000 |
|
|
|
|
$ |
29,258,000 |
|
|
|
$ |
26,375,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP cost of revenue |
|
|
|
|
|
$ |
2,635,000 |
|
|
|
$ |
2,429,000 |
|
|
|
|
$ |
5,172,000 |
|
|
|
$ |
4,642,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(56,000 |
) |
|
|
|
(47,000 |
) |
|
|
|
|
(116,000 |
) |
|
|
|
(98,000 |
) |
| Non-GAAP adjusted cost of revenue |
|
|
|
|
|
$ |
2,579,000 |
|
|
|
$ |
2,382,000 |
|
|
|
|
$ |
5,056,000 |
|
|
|
$ |
4,544,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP gross profit |
|
|
|
|
|
$ |
12,295,000 |
|
|
|
$ |
10,873,000 |
|
|
|
|
$ |
24,086,000 |
|
|
|
$ |
21,733,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
56,000 |
|
|
|
|
47,000 |
|
|
|
|
|
116,000 |
|
|
|
|
98,000 |
|
| Non-GAAP adjusted gross profit |
|
|
|
|
|
$ |
12,351,000 |
|
|
|
$ |
10,920,000 |
|
|
|
|
$ |
24,202,000 |
|
|
|
$ |
21,831,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP research and development expense |
|
|
|
|
|
$ |
2,321,000 |
|
|
|
$ |
2,094,000 |
|
|
|
|
$ |
4,500,000 |
|
|
|
$ |
4,199,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(75,000 |
) |
|
|
|
(61,000 |
) |
|
|
|
|
(152,000 |
) |
|
|
|
(127,000 |
) |
| Non-GAAP adjusted research and development expense |
|
|
|
|
|
$ |
2,246,000 |
|
|
|
$ |
2,033,000 |
|
|
|
|
$ |
4,348,000 |
|
|
|
$ |
4,072,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling and marketing expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP selling and marketing expense |
|
|
|
|
|
$ |
5,083,000 |
|
|
|
$ |
4,859,000 |
|
|
|
|
$ |
9,492,000 |
|
|
|
$ |
9,653,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(156,000 |
) |
|
|
|
(123,000 |
) |
|
|
|
|
(304,000 |
) |
|
|
|
(274,000 |
) |
| Non-GAAP adjusted selling and marketing expense |
|
|
|
|
|
$ |
4,927,000 |
|
|
|
$ |
4,736,000 |
|
|
|
|
$ |
9,188,000 |
|
|
|
$ |
9,379,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP general and administrative expense |
|
|
|
|
|
$ |
3,945,000 |
|
|
|
$ |
2,187,000 |
|
|
|
|
$ |
6,680,000 |
|
|
|
$ |
4,308,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(433,000 |
) |
|
|
|
(134,000 |
) |
|
|
|
|
(510,000 |
) |
|
|
|
(334,000 |
) |
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
(1,293,000 |
) |
|
|
|
(163,000 |
) |
|
|
|
|
(1,972,000 |
) |
|
|
|
(329,000 |
) |
| Executive separation payment (3) |
|
|
(C) |
|
|
|
(358,000 |
) |
|
|
|
- |
|
|
|
|
|
(358,000 |
) |
|
|
|
- |
|
| Non-GAAP adjusted general and administrative expense |
|
|
|
|
|
$ |
1,861,000 |
|
|
|
$ |
1,890,000 |
|
|
|
|
$ |
3,840,000 |
|
|
|
$ |
3,645,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP operating income |
|
|
|
|
|
$ |
946,000 |
|
|
|
$ |
1,733,000 |
|
|
|
|
$ |
3,414,000 |
|
|
|
$ |
3,573,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
720,000 |
|
|
|
|
365,000 |
|
|
|
|
|
1,082,000 |
|
|
|
|
833,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
1,293,000 |
|
|
|
|
163,000 |
|
|
|
|
|
1,972,000 |
|
|
|
|
329,000 |
|
| Executive separation payment (3) |
|
|
(C) |
|
|
|
358,000 |
|
|
|
|
- |
|
|
|
|
|
358,000 |
|
|
|
|
- |
|
| Non-GAAP adjusted operating income |
|
|
|
|
|
$ |
3,317,000 |
|
|
|
$ |
2,261,000 |
|
|
|
|
$ |
6,826,000 |
|
|
|
$ |
4,735,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted Operating Margin |
|
|
|
|
|
|
22.2 |
% |
|
|
|
17.0 |
% |
|
|
|
|
23.3 |
% |
|
|
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
|
|
|
|
$ |
559,000 |
|
|
|
$ |
1,115,000 |
|
|
|
|
$ |
2,129,000 |
|
|
|
$ |
2,291,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
720,000 |
|
|
|
|
365,000 |
|
|
|
|
|
1,082,000 |
|
|
|
|
833,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
1,293,000 |
|
|
|
|
163,000 |
|
|
|
|
|
1,972,000 |
|
|
|
|
329,000 |
|
| Executive separation payment (3) |
|
|
(C) |
|
|
|
358,000 |
|
|
|
|
- |
|
|
|
|
|
358,000 |
|
|
|
|
- |
|
| Income tax impact |
|
|
(D) |
|
|
|
326,000 |
|
|
|
|
511,000 |
|
|
|
|
|
1,146,000 |
|
|
|
|
1,054,000 |
|
| Non-GAAP adjusted net income |
|
|
|
|
|
$ |
3,256,000 |
|
|
|
$ |
2,154,000 |
|
|
|
|
$ |
6,687,000 |
|
|
|
$ |
4,507,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
|
|
|
|
$ |
0.01 |
|
|
|
$ |
0.02 |
|
|
|
|
$ |
0.04 |
|
|
|
$ |
0.04 |
|
| Adjustments per share |
|
|
(A-D) |
|
|
$ |
0.05 |
|
|
|
$ |
0.02 |
|
|
|
|
$ |
0.08 |
|
|
|
$ |
0.04 |
|
| Non-GAAP adjusted net income |
|
|
|
|
|
$ |
0.06 |
|
|
|
$ |
0.04 |
|
|
|
|
$ |
0.12 |
|
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used to compute Non-GAAP adjusted net income per share - diluted |
|
|
|
|
54,270,000 |
|
|
|
|
58,373,407 |
|
|
|
|
|
55,425,683 |
|
|
|
|
57,886,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reconciliation of Net income to EBITDA and Adjusted EBITDA: |
|
|
(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
$ |
559,000 |
|
|
|
$ |
1,115,000 |
|
|
|
|
$ |
2,129,000 |
|
|
|
$ |
2,291,000 |
|
| Income tax provision |
|
|
|
|
|
|
437,000 |
|
|
|
|
647,000 |
|
|
|
|
|
1,394,000 |
|
|
|
|
1,334,000 |
|
| Depreciation expense |
|
|
|
|
|
|
564,000 |
|
|
|
|
547,000 |
|
|
|
|
|
1,098,000 |
|
|
|
|
1,052,000 |
|
| EBITDA |
|
|
|
|
|
|
1,560,000 |
|
|
|
|
2,309,000 |
|
|
|
|
|
4,621,000 |
|
|
|
|
4,677,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
|
|
(A) |
|
|
|
720,000 |
|
|
|
|
365,000 |
|
|
|
|
|
1,082,000 |
|
|
|
|
833,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
1,293,000 |
|
|
|
|
163,000 |
|
|
|
|
|
1,972,000 |
|
|
|
|
329,000 |
|
| Executive separation payment (3) |
|
|
(C) |
|
|
|
358,000 |
|
|
|
|
- |
|
|
|
|
|
358,000 |
|
|
|
|
- |
|
| Adjusted EBITDA |
|
|
|
|
|
$ |
3,931,000 |
|
|
|
$ |
2,837,000 |
|
|
|
|
$ |
8,033,000 |
|
|
|
$ |
5,839,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA margin |
|
|
|
|
|
|
26.3 |
% |
|
|
|
21.3 |
% |
|
|
|
|
27.5 |
% |
|
|
|
22.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Stock-based compensation charges are included as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenues |
|
|
|
|
|
$ |
56,000 |
|
|
|
$ |
47,000 |
|
|
|
|
$ |
116,000 |
|
|
|
$ |
98,000 |
|
| Research and development |
|
|
|
|
|
|
75,000 |
|
|
|
|
61,000 |
|
|
|
|
|
152,000 |
|
|
|
|
127,000 |
|
| Selling and marketing |
|
|
|
|
|
|
156,000 |
|
|
|
|
123,000 |
|
|
|
|
|
304,000 |
|
|
|
|
274,000 |
|
| General and administrative |
|
|
|
|
|
|
433,000 |
|
|
|
|
134,000 |
|
|
|
|
|
510,000 |
|
|
|
|
334,000 |
|
|
|
|
|
|
|
$ |
720,000 |
|
|
|
$ |
365,000 |
|
|
|
|
$ |
1,082,000 |
|
|
|
$ |
833,000 |
|
| (2) Strategic consulting and litigation costs are included as follows: |
|
|
|
|
|
|
|
|
|
|
|
| General and administrative |
|
|
|
|
|
|
1,293,000 |
|
|
|
|
163,000 |
|
|
|
|
|
1,972,000 |
|
|
|
|
329,000 |
|
|
|
|
|
|
|
$ |
1,293,000 |
|
|
|
$ |
163,000 |
|
|
|
|
$ |
1,972,000 |
|
|
|
$ |
329,000 |
|
| (3) Executive separation payment is included as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative |
|
|
|
|
|
|
358,000 |
|
|
|
|
- |
|
|
|
|
|
358,000 |
|
|
|
|
- |
|
|
|
|
|
|
|
$ |
358,000 |
|
|
|
$ |
- |
|
|
|
|
$ |
358,000 |
|
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This presentation includes Non-GAAP measures. Our Non-GAAP measures are not meant to be considered in isolation or as a
substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared
in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management
uses these measures, the usefulness of these measures and the material limitations of these measures, see Notes to Reconciliation
of GAAP to Non-GAAP Financial Measures on the next page.
|
|
|
|
|
|
|
|
|
ZIX CORPORATION
|
|
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES OUTLOOK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOW |
|
|
HIGH |
|
|
LOW |
|
|
HIGH |
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
Twelve Months Ended |
|
|
|
|
September 30, |
|
|
September 30, |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2016 |
|
|
2016 |
|
|
2016 |
|
|
2016 |
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP revenue |
|
|
|
$ |
15,000,000 |
|
|
$ |
15,100,000 |
|
|
$ |
59,600,000 |
|
|
$ |
60,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.06 |
|
|
$ |
0.08 |
| Stock-based compensation charges |
|
|
|
$ |
0.02 |
|
|
$ |
0.01 |
|
|
$ |
0.05 |
|
|
$ |
0.04 |
| Strategic consulting and litigation costs |
|
|
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.08 |
|
|
$ |
0.06 |
| Executive separation payment |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
| Income tax impact |
|
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$
|
0.04
|
|
|
$ |
0.05 |
| Non-GAAP adjusted net income |
|
|
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
$
|
0.24
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used to compute Non-GAAP adjusted net income per share - diluted |
|
|
|
|
54,270,000 |
|
|
|
54,270,000 |
|
|
|
55,425,683 |
|
|
|
55,425,683 |
|
|
This presentation includes Non-GAAP measures. Our Non-GAAP measures are not meant to be considered in isolation or as a
substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared
in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management
uses these measures, the usefulness of these measures and the material limitations of these measures, see Notes to Reconciliation
of GAAP to Non-GAAP Financial Measures on the next page.
ZIX CORPORATION
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
USE OF NON-GAAP FINANCIAL INFORMATION
The Company occasionally utilizes financial measures and terms not calculated in accordance with generally accepted accounting
principles in the United States (“GAAP”) in order to provide investors with an alternative method for assessing our operating
results in a manner that enables investors to more thoroughly evaluate our current performance as compared to past performance. We
also believe these Non-GAAP measures provide investors with a more informed baseline for modeling the Company’s future financial
performance. Management uses these Non-GAAP financial measures to make operational and investment decisions, to evaluate the
Company's performance, to forecast and to determine compensation. Further, management utilizes these performance measures for
purposes of comparison with its business plan and individual operating budgets and allocation of resources. We believe that our
investors should have access to, and that we are obligated to provide, the same set of tools that we use in analyzing our results.
These Non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered
a substitute for or superior to GAAP results. We have provided definitions below for certain Non-GAAP financial measures, together
with an explanation of why management uses these measures and why management believes that these Non-GAAP financial measures are
useful to investors. In addition, in our earnings release we have provided tables to reconcile the Non-GAAP financial measures
utilized to GAAP financial measures.
ADJUSTED NON-GAAP MEASURES
Our Non-GAAP measures adjust GAAP Cost of revenue, Gross profit, Research and development expense, Selling and marketing
expense, General and administrative expense, Operating income, Net income, Net income per share - diluted, and EBITDA for non-cash
stock-based compensation expense, and strategic consulting and litigation costs to derive Non-GAAP adjusted Cost of revenue,
adjusted Gross profit, adjusted Research and development expense, adjusted Selling and marketing expense, adjusted General and
administrative expense, adjusted Operating income, adjusted Net income, adjusted Net income per share - diluted and adjusted
EBITDA. We provide a reconciliation of these adjusted Non-GAAP measures to GAAP Gross profit, Operating income, Net income, Net
income per share - diluted and EBITDA.
Our forward-looking adjusted Non-GAAP earnings per share information consistently excludes non-cash stock-based compensation
expense. Additionally, the adjusted Non-GAAP earnings per share will consistently exclude litigation expenses and non-recurring
items that impact our ongoing business. See items (A) through (D) below for further information on the current quarter's
reconciling items.
Items (A) through (E) on the "Reconciliation of GAAP to Non-GAAP Financial Measures" table are listed to the right of certain
categories under "Gross profit," "Operating income," "Net income," "Net income per share - diluted" and "EBITDA" and correspond to
the categories explained in further detail below under (A) through (E).
(A) Non-cash stock-based compensation charges relating to stock option grants, restricted stock, and restricted stock units
awarded to and accounted for in accordance with Share-Based Payment accounting guidance. See (1) on previous page for breakdown of
stock-based compensation. Because of varying valuation methodologies, subjective assumptions and varying award types, the Company
believes that the exclusion of stock-based compensation charges provides for more accurate comparisons to our peer companies and
for a more accurate comparison of our financial results to previous periods. Additionally, the Company believes it is useful to
investors to understand the specific impact of non-cash stock-based compensation charges on our operating results.
(B) Strategic consulting and litigation costs. See item (2) on previous page. The Company’s management excludes certain
board-directed consulting costs and litigation expenses when evaluating its ongoing performance and/or predicting its earnings
trends and therefore excludes these charges on our adjusted operating results.
(C) Executive separation payment relating to CFO employment termination benefits agreement. See item (3) on previous page. The
Company’s management excludes these costs when evaluating its ongoing performance and/or predicting its earnings trends and
therefore excludes these charges on our adjusted operating results.
(D) The Non-GAAP adjustment to the tax provision represents the non-cash tax expense included in the GAAP tax provision,
including the current period utilization of deferred tax assets created in previous periods. The remaining provision for income
taxes represents expected cash taxes to be paid.
(E) EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA adds back stock-based
compensation charges and litigation expenses.
ZixCorp
Company Contact
Taylor Stansbury Johnson, 214-370-2134
tjohnson@zixcorp.com
or
Investor Contact
Liolios Group, Inc.
Matt Glover and Najim Mostamand, 949-574-3860
ZIXI@liolios.com
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